Are You Charging Design/Change Fees?

This industry consultant says in this economy it’s an absolute must.

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Green industry business advisor Jerry Gaeta has consulted on successful estimating for landscape construction and business projects for years. As someone who ran his own landscape, irrigation and landscape maintenance business for 28 years before selling it, he knows the industry inside and out. Here’s what he has to say about charging design and/or change fees.

Do you think a design fee should be charged? Why?I think it should be charged; it’s something the industry has talked about for years, and it’s a hard thing to sell in certain areas. The reason is to establish a worth of your time — there is no such thing as a free estimate. A lot of people look at the design as a free estimate, so I feel there should be a design fee. I’m hearing in the market in this economy … there’s not enough labor to keep up with the demand, so it’s a great screening tool to have a design fee.

What does a design fee communicate to the client?The majority of companies in the U.S. don’t charge for design fees. But explain why you set yourself apart — talented staff, been in the business X amount of years, etc. Give them a reason why you’re charging and others aren’t. An architect or lawyer charges a fee — we’re professionals, too, and that is the real difference.

How can the fee be charged or given back to the client as added value?It can be retained by the contractor, prorated back to the client depending on the size of project, or some rebate it back immediately. My firm used it as a bargaining chip — if [the client] wanted to negotiate on price … we had the option to rebate the fee to them and give it back.

What is a good amount to charge, and what is the fee paying for?The entire design staff is already an overhead [cost] so it’s put into the marks of the estimate. I believe it needs to be a reasonable amount of money if you’re a design/build firm with an architect on staff. I’ve heard $50 to $75 to $100 an hour, and be upfront about how long it will take, have a design agreement and state what you’re going to do.

How does a design fee protect someone in the landscape design/build industry?It helps with screening people, especially in spring, who want to get four or five different estimates. The worst thing is when they competitively design because they’re never charging apples to apples. And nowadays clients can copy and scan the design and then shop your plan. The clientele aren’t used to design fees — they don’t like it, but if you’re a good company, you’re selling your expertise, and for us it locked the client in and got rid of the people who aren’t serious.

Do you have any warnings about charging design fees?
The negative is the client would then own the design, and they’re not required to use your company to build it out. So, you have to be careful you don’t become a designer for another company. Draw a schematic that’s vague — that’s hard for the client to shop it around and buy supplies.

What about revisions to a design — when can that be done for free or when should the client be charged?Change fees depend on how good your designers are and how well they listened to the client. A lot of people don’t listen to the client and go with what they want, so they have to listen to the client. If a change fee is because the designer wouldn’t listen — you wouldn’t feel comfortably ethically to charge. But many companies allow an extra revision or two and after that will start charging. Listen and ask enough questions and get as close as you can to what they want. If you’re going back two or three times, you’re either not listening or giving clients too many options. Clients can go online now and see too many options. So, I believe it’s our job to steer them with minimum plant options and get to that point. Don’t give them 55 different colors; maybe give them two choices.

What’s your final word on charging design fees?People have stepped away from design fees in past years, but now that the demand is there, they’re very busy, so this a great way to screen. It scares a lot of people, and I also feel it forces your designer to commit, and you’re going to go in and offer a design and set up a return visit to present the design and price it.

I would recommend that anyone does it, spring and fall when you’re busy, the designer has the option to charge. But there’s always an option not to charge — in summer when work slows down it can be relaxed. So, it’s not set in stone; base it on your workload. And don’t get discouraged: Start at a lower price, and if you’re not confident, then you can bend it back.

Every contractor needs to do two things right now based on lack of employees and volume of work: Charge a design fee to screen clients and raise your price. Especially if you’re slammed and booked out, think about incrementally creeping it up — we never know where the market is; we’re always told we’re too cheap and too expensive. So, you have to test it.